HR needs to step outside of its comfort zone

In an exclusive interview with Human Resources, four senior global HR consultants from KPMG share their views on how the HR function has progressed, and what limitations stand in its way to become a strategic business partner.

How has the war on talent changed since the past five years, in terms of priorities or processes?

IIaria Gregotti, global lead for talent management and behavioural change management, KPMG (IG):What is different in this new war for talent compared to five or ten years ago is the need to take a more strategic approach to addressing talent management activities within organisations.

People are looking for different things from their employers, there are new generations coming in, and older generations are about to leave the workforce, taking away with them a lot of knowledge.

There are also diversity and inclusion priorities that weren’t there five years ago. So there’s a need to take a more holistic approach when dealing with talent.

In our point of view, talent is everyone in the organisation, and focusing on the top 5-10% of high potentials isn’t enough to address capability gaps.

The onus is on the HR function and the business leaders alike to look at their business strategy ahead and focus on the critical skills they need before deploying talent plans for the whole organisation, and not just the top 5-10%.

And how can these business leaders play a more active role at managing talent?

IG: We strongly believe that talent management should be owned at the executive and board committee level, rather than something HR is responsible for.

In this scenario, HR provides insights, required support, and guidance to the business. But it is the business that owns the talent agenda.

One consumer marketing organisation I work with identified their top 260 roles globally and any decision around appointing or succession planning for these roles was taken at the executive level, rather than by the individual functional heads.

Peter Outridge, managing director, Asia Pacific HR centre of excellence, KPMG (PO): There’s a really strong shift away from focusing on a few high performers and saying, “this is our top talent pool, and we have to look after them” to asking “what are the strategic roles in the organisation and how do we develop them.”

The organisations that focus only on higher performers have not had outstanding business performance. That shows the way to get outstanding business performance is to treat all of your people as an asset rather than focusing only on high performers.

How do you think recruitment priorities have changed?

Kate Holt, director, Global HR centre of excellence – consulting, UK, KPMG (KH): All too often, HR functions make knee-jerk reactions to external recruitment, and external recruitment sometimes is in the wrong part of the value chain. Taking a more strategic approach to recruitment is about how you build your talent, how you allow a strong career development with the right people, and where you decide to buy that talent, along with the type of skills you want to bring in your organisation.

There needs to be more of a considered approach before the recruitment team actually goes to the market. I think there has been a shift change to a more direct approach to recruitment with less usage of an agency. It also involves understanding the talent pool that exists for you to draw on, and thinking much more laterally about that talent pool. It is more about bringing a breadth of skills and experiences into the organisation to help drive innovation and collaboration into the organisation.

There are two key points here: one is around taking a strategic approach to buying the right talent for the right parts of the value chain, and the second is bringing in a greater and broader set of skills.

IG:

Adding onto that, the other shift is re-looking into the employee value proposition, and really ensuring that the psychological contract is well articulated by the organisation. There needs to be an understanding of what is your unique proposition as the employer of choice that will attract the right talent, and retain the right talent.

The new generations are pushing for a change in the old psychological contracts, pretty much across all industries and regions. That’s definitely something that a lot of organisations are embracing and working on actively.

PO:

An interesting observation here in Asia, and in other regions, is that the role of social media, and of the whole online community, has changed recruitment from being a discreet process to one with increased focus on the end-to-end employee value proposition. People are out there scanning organisations, understanding what they are doing and thinking about “what is the organisation going to give me?”.

It is also reaching a point where people, in particular graduates, are looking at who is in the organisation, and what their career paths have been like. Candidates are actually making their career decisions based on the attributes, and experiences, of people within organisations. It has evolved from an exchange where ‘company X seeks a candidate’ to ‘candidate seeks out company X based on their brand and the experiences and attributes of their employees’.

Company X needs to build its brand, build its social media strategy, and be very cognizant of how it is observed, and the deal it offers to potential employees. The paradigm is really changing quite significantly.

People look at their employment marketplace as the world, and it is not their local country anymore. At a national level, you already encounter challenges, such as multi-generational issues. But the fact that we’re more borderless now adds to this complexity. In one company, such as here in KPMG, we have more than 30 nationalities. Just dealing with that is one of the biggest challenges we face.

The second challenge is that building constructs which facilitate this diversity is not as easy as it was in the past. You’ve got the younger generation and the older generation. The younger generation have free reigns when it comes to their career, they are free agents. They look at work practices in a different way than older generations.

That adds a whole layer of complexity when you think about it, and going forward it going to get even more complex.

How important do you think degrees play a role when it comes to hiring the right candidates? Do degrees trump skills and experiences in the workplace?

IG:

There’s an emerging trend to move away from basing recruitment decisions on academic achievements, and instead to recruit more based on attitudes of the candidate, motivation levels, learning agility and potential. The world we live in has allowed us to gather data on the impact of recruitment policies on business outcomes, and the evidence shows that there isn’t always a correlation between academic achievement and the value that an employee adds to the company once they are in the company.

There a lot of organisations globally who are looking at school-leavers, and offering higher education as part of their employee value proposition to attract the right people. A critical part of this is matching employees’ motivation and value sets with the organisational values. The evidence shows that this is a much better criteria for recruitment which will predict success of the individual in the organisation than which schools they came from and how well they did there.

PO:

When we talk to organisations worldwide about their cultural change opportunities, what emerges as a key driver is the alignment between organisational values, and personal values of the people in the organisation. That alignment is a key contributor to organisational success.

KH:

The other link to recruitment stepping away from academic background is around social mobility and redistribution of economic wealth. Organisations are recognising their role to play in making sure there is access to employment and recognising that your access to a high level of academic achievement is not often reflective of your abilities, but is more often a situation of your families.

So, giving everyone that equal opportunity to gain employment in strong careers that may make them more prosperous than their original family backgrounds is something which more employers are doing now.

For various HR processes, HR leaders are relying a lot on data. But are they sufficiently trained to interpret and use the data they collect today?

KH:

One of the data points we found from a survey we did with CEOs was that only 15% of HR functions were providing insightful information from data. I don’t think all of them are collecting the right data points. They are also not working collaboratively with their colleagues in finance and marketing departments and really looking at the correlation between the impact of HR interventions around compensation and performance management, and the impact its having on financial outcomes or customer satisfaction or customer care.

The data that HR holds is often poorer than what people assume. There is a lack of ability to pull data together and a lack of ability to interpret that data and take it forward to say ‘we predict these trends or these actions will happen’. That’s not happening sufficiently throughout the HR function. This needs to happen quickly because businesses are getting frustrated with the fact that the technologies are present, the capabilities are present across industries, but HR is not using those to drive value.

IG:

We have a rather provocative view in that we believe this is HR’s last opportunity to demonstrate they can really add value to the business.It does require pushing yourself outside of your comfort zone as an HR professional, and engage with the business strategy and the business priorities and business understanding and use the data to generate insights.

Traditionally organisations have been producing reports linking HR data with other HR data. We need to help these organisations move towards linking HR data with business data and outcomes. So saying ‘what is the co-relation behind my people leaving to my sales market shares changes’, rather than looking at what is the relation between diversity and engagement. This is when the real value of HR analytics comes through.

It’s a paradigm shift which needs to happen.

PO:

What we find is that some organisations are spending millions of dollars on learning and development programs, and more and more the CEOs are asking “ what is my payoff for this huge investment in learning and development?” The work we’re doing with some clients on evidence based HR really makes that connection between the business outcomes and the key drivers of performance.

What we’re actually finding is, some of the key contributors to a business outcomes are not the number of hours or the number of dollars spent on learning and development, but the range of other demographic factors around the actual employees. So, again that ties back into the recruitment process and questions if organisations are actually hiring the right people into the organisation.

ML:

I wanted to add to the point that they’ve just mentioned. There’s a bit of teaser from what we find out from talking to hundreds of the stakeholders from the study I was talking to you about : because of this new demands from the business about being able to monetise and show value, we know of return of capital employed.

But now, let’s talk about return of human capital employed. In terms of translating that into business, we can suggest also that the profile of HR in many of the organisations need to change, because you need to understand data, statistics and mathematics. Some of that profile hasn’t been that important in the past, not because of anything specific, but because the priorities were quite different at that time. But these are the things people are now looking at.

For example, Thomson Reuters have been tracking performances of companies who have been engaging in diversity practices, they for example put forth data that will be compared to different companies, those who have diversity practices and very properly constructed ones actually demonstrate almost 2.2 times more profitability than their peers , and twice as much in terms of stock value.

So, these are the things people will understand, this is when businesses will then sit up and say, “oh, right, let’s do something then.” Because, as long as you’re talking about our attrition is this amount, so we had this amount of increment in the last year, it’s not going to be that scintillating. It must be something that grabs the business, talks about how it changes the value and increases what you want. I think that’s the conversation that we must be having these days.

Besides data analytics skills, what other skills do you think HR leaders really lack and really need to monitor?

KH:

I think that the key one is being able to make sure that HR are carrying out work that is of value. They need to ensure that they’re linking it; that it is evidence based action, and that it is working about how HR can drive and support the business actively. There’s not enough evidence that HR leaders are evidence based activity for their function. That’s the key challenge – that HR as a skill or focus is still lacking in the profession.

I think aside from the core competencies that you would expect across leadership, the other one for me is this whole piece around the moral context of the organisation, I still think that is an really important role for the HR team.

It’s a unique role on the board to be that moral compass – especially since you hold the mirror up to the organisation, are the conscience of the organisation. You also have to be comfortable in a role of tension, including holding that tension in the organisation and calling out to behaviour that isn’t compliant to certain values and beliefs.

If you look at some of the challenges, particularly a few sectors had over the past few years, you could argue that the HR function wasn’t doing that role sufficiently enough. They allowed too much incompliance and accepted behaviour that they must have known wasn’t compliant with the values and behaviours. They, perhaps, didn’t feel in a comfortable position of having that tension and being provocative with the board and challenging the board.

All too often we see HR doing what they comfortable doing, what their comfort zone is and what they did in previous organisations, rather than the key focuses on the business strategy.

IG:

There’s some beliefs that HR consultants as well as HR people are the ones who make the rest of the organisation feel good and to Kate’s point, that is actually not the case. If you’re doing your job properly, you’re the one who challenges the business to do the right thing by the people, to achieve more with the people.

PO:

As important as those things are, HR does much more than that.

Are HR leaders today sufficiently skilled to lead the business and becomes CEOs?

PO:

What we are seeing is that quite a lot of people who have come from within the business are appointed to lead the HR function – that is great because it provides new perspectives for the HR function and challenges a lot of the long-established paradigms of the function.

KH:

But it is also a strong reflection of the fact that there isn’t a strong succession plan within the HR function that’s got that business acumen and ability to build the stakeholders across the business. It does provide a certain richness to the HR function and a real sense of understanding of the business. But it is disappointing to see there’s not enough capability within the HR function to step into strong roles.

IG:

I think there is no reason a strong HR professional shouldn’t be able to get to a CEO role. But I don’t think the route to being a CEO is through leading only a single function such as HR.